AMD Will Receive $60 - $100 for Every SoC for Next-Gen Game Consoles - Financial Analysts

Advanced Micro Devices will receive from $60 to $100 per every next-generation video game system from Microsoft Corp. and Sony Corp. and will likely make quite a lot of money even in case the new PlayStation 4 and Xbox One game consoles will not be as successful as current-generation consoles.

Financial analysts believe that AMD will get from $60 to $100 for every accelerated processing unit containing eight x86 general-purpose cores as well as Radeon HD graphics engines designed for Microsoft Xbox One and Sony PlayStation 4. Mark Lipacis, an analyst with Jefferies & Co., thinks that the average price of a console SoC will be between $60 and $80; Hans Mosesmann with Raymond James is a little bit more optimistic and believes that the company will get from $60 to $90 per chip.

“Our analysis assumes that this generation of consoles ramps up at 60-90% of the previous model, with average selling prices (ASPs) varying from $60-100,” said Mr. Mosesmann.

Both analysts are actually extremely conservative about pricing per system-on-chip early in the cycle since both Microsoft and Sony are used to pay vast amounts of money for hardware in the beginning of their console’s lifecycles. For example, back in 2005 Microsoft spent around $105 on custom triple-core IBM Power chip in Xbox 360 as well as around $140 on ATI R500 graphics sub-system. Sony initially paid $89 for the Cell processor and $129 got Nvidia RSX graphics engine inside the PS3. Keeping in mind that the AMD chips inside the PS4 and Xbox One feature eight x86 cores, advanced graphics adapter, sophisticated memory controller as well as plethora of custom logic, it is illogical to charge for them less than AMD charges for its mainstream APUs that hardly offer similar performance in games. As a result, the price that AMD should be getting will likely be north from $100 in at least 2013 – 2014 timeframe.

But even at $60 to $90 AMD should make a good money, assuming high demand for the consoles and good yield of the chips.

“While console sell-through in 2014 is up for debate, we note that both the previous generation console systems (PlayStation 3 and Xbox 360) sold ~9 million in units in their first full calendar year. We suspect that competition from set-top boxes, streaming devices, and tablet/mobile gaming may pressure growth of console systems vs. prior years, but we still believe the installed base for next gen consoles is well into the double-digit millions. Our analysis assumes that this generation of consoles ramps up at 60% to 90% of the previous model, with average selling prices (ASPs) [per AMD APU] varying from $60 to $100. The mid-point of our analysis suggests a $1.06 billion contribution from consoles in 2014,” said Hans Mosesmann.